The Boston Model: Achieve the highest possible profit

If a company wants to get an overview of its product portfolio, it typically takes a trip to Boston. Well... not the American city, but the Boston Model (better known as the Boston Matrix) planning tool developed by the Boston Consulting Group back in the early 1970s. If you're not yet familiar with this simple model, here's a sharp introduction to how you can get an illustrative overview of your company's products.

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What is the Boston Model?

When dealing with a large product portfolio, it is both relevant and important to investigate and analyze which products to sell, keep or invest more in. The Boston Model is an effective tool for creating an overview of your company's product portfolio, allowing you to determine how your resources are best used to maximize profit.

The model divides the company's products into four fields, which are made up of a y and x axis. The y-axis defines the market growth in percent. High market growth means that many consumers demand the given product - it is an attractive part to be in. The x-axis represents the relative market share, which is measured in relation to the company's biggest competitor. Market share indicates the extent to which a product can generate revenue.

The four fields are each illustrated with a unique symbol that represents a certain level of profitability:

  • Star (Star)
  • Question mark (Questionmark)
  • Malkeko (Cash Cow)
  • Dog (Dog)

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For example:

				
					Foto: <a href="https://amplify.dk/en/academy/boston-modellen/">Amplify: Boston modellen</a>

				
			

The market position of any company's products will typically change over time, whether it's due to new consumers entering the market, trends, technological developments or changes in society. It's therefore a good idea to keep an eye on the position of your products on an ongoing basis.

Star

The star defines products that are in a position of high growth and high relative market share. Stars are important products for a company as they help build a strong brand. However, it takes more effort to maintain a product here, which means they are not necessarily good business. It is therefore important to incorporate them so that they can survive without too much promotion. In this way, they will typically become a cash cow. If they are not maintained in this position, they risk becoming dogs.

Question mark

The question mark will typically refer to new products that are still in the introduction phase. This also means that these products have a low market share, but are in a fast-growing industry where companies need to make an active effort to gain market share. The question mark has the potential to become a star, but if they don't succeed, growth will slow down and they will become dogs.

Malkeko

A cash cow is defined by the product having a large market share in a slow growing industry. These products are not particularly interesting to analyze, but they are attractive to companies as they generate money without the need for much marketing. Like a dairy cow, the company takes out as much as possible - but at the risk of leaving the product weak.

Dog

Dogs are products that are in a position of low relative market share in a slow growing market. They will typically be dairy cows that are either not cared for or have run out of time. As such, they don't generate a very profitable profit, which harms the possibility of future investment in the business. This means that they should either be liquidated or repositioned, otherwise they can end up costing the company a lot of money.

Get help to increase revenue in your business

This made you so much wiser about the simple Boston Matrix and how you can use it to sharpen your company's product portfolio. Knowing your products and being able to allocate your resources profitably is an essential part of running an efficient and growing business. If you need help and advice on how to market your products online or create digital visibility, don't hesitate to send us a message.

At Amplify, we are a marketing agency that deals with SEO, advertising on Google and additional digital marketing - we are also experts in creating digital visibility and reaching the target audience both through Facebook advertising and SoMe marketing. Contact me or one of my colleagues at Amplify on tel. +45 70 60 50 28 or via email at info@amplify.dk.

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